- Establishes joint venture with Xuzhou Construction Machinery Group in Xuzhou, China, to construct 50,000 engines

Doosan Infracore has embarked on its plans to join the league of the world’s top 10 diesel engine makers by entering the Chinese diesel engine market.

The Group announced on September 8 that its Chinese subsidiary, DICI has signed a contract with the Xuzhou Construction Machinery Group to establish a joint venture to produce and market diesel engines for construction machinery, large trucks and power generators in China.

Under the deal, the two companies agreed to invest a total of 680 million Yuan (about 124.4 billion Won) in 50 to 50 stakes to XUZHOU XUGONG DOOSAN ENGINE CO., LTD. over the next four years. A production plant for the new business venture is set to be constructed at a 198,000 sq. meter site in the Xuzhou Economic Development Zone, Jiangsu Province.

Operations will begin in phases with phase 1 project to start in October. When works begin, the production plant will be able to produce 15,000 units of 6 liter and 8 liter diesel engines a year. By 2011, the production plant will be in full operation. And when phase 2 project commences by 2013, the company will be able to increase its production to 50,000 units.

When the two phased investments are completed, the joint venture will have the capacity to churn out 50,000 units a year, a volume that is equivalent to that of Doosan Infracore’s Incheon plant in Korea, which produces 56,000 units. If the joint venture attains its sales target of 50,000 units in 2015, it will post an estimate of 3.2 billion Yuan in annual sales.

If it meets its target by 2015, Doosan Infracore will join the league of the world’s top 10 diesel engine makers. By then, it will effectively be able to produce around 100,000 mid- to large-sized diesel engines in Korea and its subsidiaries in China and abroad, and will be on par with the top industry players in terms or production ability.

Moreover, Doosan will be able to supply its own machine tools and facilities to be used in the new engine plant. Together with its hydraulic parts and components, it will be able to synergize its resources for the new joint venture.

The partnership with Xuzhou Construction Machinery Group is the optimal strategy for Doosan to enter into the Chinese diesel engine market which is the world’s largest due to policies restricting foreign companies from setting up production bases on its own. Xuzhou Construction, which urgently needs to produce engines exclusively for its heavy construction equipment and large-sized buses on the other hand, can benefit from this deal because it can now fulfill its orders by entering into this contract with Doosan.

Lee Hwang-ryul of Doosan Infracore’s Engine & Material Business Group, said, “The joint venture will allow Doosan to synergize from our resources and expertise from our existing business and the meantime allow us to maintain a stable and cost competitive operation in our recently acquired second production base.” He stressed, “We will mobilize all our capacity to ensure that Doosan joins the league of the world’s top 10 largest engine makers in the coming years.”

Meanwhile, Xuzhou Construction Machinery Group is the largest company in the construction equipment sector, with 22 subsidiaries under its belt. The Group produces and sells 30,000 units of cranes, wheel loaders, rollers, and other heavy equipment for road operation in a year. As of late 2008, the Group also posted 14.9 billion Yuan (2.9 trillion Won) in consolidated assets and 40.8 billion Yuan (8.1 trillion Won) in sales.